Weak On High Volume: Vimicro International (VIMC)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Vimicro International ( VIMC) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Vimicro International as such a stock due to the following factors:

  • VIMC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $5.7 million.
  • VIMC has traded 254,826 shares today.
  • VIMC is trading at 2.69 times the normal volume for the stock at this time of day.
  • VIMC is trading at a new low 3.32% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on VIMC:

Vimicro International Corporation, together with its subsidiaries, designs, develops, and markets semiconductor products with multimedia applications in Mainland China, Hong Kong, and the United States. The company operates through Video surveillance Solutions and Video Processor segments.

The average volume for Vimicro International has been 449,000 shares per day over the past 30 days. Vimicro International has a market cap of $392.8 million and is part of the technology sector and electronics industry. Shares are up 161.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Vimicro International as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • VIMC's very impressive revenue growth greatly exceeded the industry average of 0.8%. Since the same quarter one year prior, revenues leaped by 51.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • VIMC's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.30, which illustrates the ability to avoid short-term cash problems.
  • 41.97% is the gross profit margin for VIMICRO INTL CORP -ADR which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, VIMC's net profit margin of 6.56% significantly trails the industry average.
  • Powered by its strong earnings growth of 187.50% and other important driving factors, this stock has surged by 296.24% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, VIMICRO INTL CORP -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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